Lpl Financial Holdings Inc. · NASDAQ:LPLA
Lpl Financial — Q4 2020 Earnings Presentation
27 slides from Lpl Financial's earnings presentation, Feb 4, 2021
Slide 1: Q4 2020 Earnings Key Metrics
Q4 2020 Earnings Key Metrics LPL Financial Holdings Inc. Q4 2020 Earnings February 4, 2021 Member FINRA/SIPC 1 LPL Financial Member FINRA/SIPC
Slide 2: Notice to Investors: Safe Harbor Statement
Notice to Investors: Safe Harbor Statement Statements in this presentation regarding LPL Financial Holdings Inc.’s (together with its subsidiaries, the “Company”) future financial and operating results, growth, priorities, business strategies and outlook, including forecasts and statements relating
Slide 3: Notice to Investors: Non-GAAP Financial Measures
*Notice to Investors: Non-GAAP Financial Measures Management believes that presenting certain non-GAAP financial measures by excluding or including certain items can be helpful to investors and analysts who may wish to use some or all of this information to analyze the Company’s current performance,
Slide 4: We continue to drive long-term business growth…
We continue to drive long-term business growth… Total Advisory and Brokerage Assets ($ billions) Total Net New Assets(1) ($ billions) Total Advisory and Brokerage Assets Advisory Assets % of Total Assets YOY Organic Total NNA Acquired Total NNA Organic Annualized Growth Rate SEQ Change Change $2
Slide 5: …And solid financial results
…And solid financial results Gross Profit* ($ millions) EBITDA* ($ millions) 556 543 576 276 280 508 536 538 506 534 268 488 250 242 232 217 207 205 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 2018 2019 2020 EBITDA* as a % of Gross Profit* EPS Prior to Amortization of Intang
Slide 6: We continued to drive solid organic growth with a Net New Asset growth rate
We continued to drive solid organic growth with a Net New Asset growth rate of ~9% in Q4 and 7%+ for the past year Total Net New Assets(1) ($ billions) Net New Advisory Assets(4) ($ billions) Net New Brokerage Assets(5) ($ billions) Organic Total NNA Organic Advisory NNA Organic Brokerage NNA
Slide 7: Update on our agreement to acquire Waddell & Reed’s wealth management business
Update on our agreement to acquire Waddell & Reed’s wealth management business Transaction Details at Signing Progress to Date Waddell & Reed’s wealth management client assets have increased by ~$7B • On December 2nd, we signed an agreement to acquire Waddell & Reed’s wealth management business • Tr
Slide 8: Our Corporate and Hybrid Advisory platforms continue to grow
Our Corporate and Hybrid Advisory platforms continue to grow Corporate and Hybrid Advisory Platform Mix ($ billions) Corporate and Hybrid Advisory NNA Mix ($ billions) Hybrid Advisory Assets(7) Organic Hybrid Advisory NNA(9) Corporate Advisory Assets(8) YOY SEQ Organic Corporate Advisory NNA
Slide 9: We grew Centrally Managed Assets at a 17% organic growth rate in Q4
We grew Centrally Managed Assets at a 17% organic growth rate in Q4 Centrally Managed Assets(11) ($ billions) Centrally Managed NNA(12) ($ billions) Centrally Managed Assets YOY SEQ Organic Centrally Managed NNA Centrally Managed Assets % of Total Advisory Assets Change Change Organic Annualized
Slide 10: We continued to drive solid EBIT ROA in Q4
We continued to drive solid EBIT ROA in Q4 Average Total Advisory & Brokerage Assets ($ billions) Average Total Advisory & Brokerage Assets(13) Gross Profit* ROA(14) OPEX ROA(15) YOY SEQ Change Change $784 11% 4% $732 $756 $708 $720 $663 $672 $682 $656 30.8 bps 31.1 bps 31.4 bps 30.7 bps 29.7 bps
Slide 11: Gross Profit* ROA decreased year-over-year, primarily driven by lower interest rates
Gross Profit* ROA decreased year-over-year, primarily driven by lower interest rates Gross Profit* ROA(14) (bps) Net Advisory & Commission Fees Other Asset-Based(17) Interest Income and Other, net Our Gross Profit ROA is primarily Transaction & Fee, Net of BC&E Client Cash impacted by 3 ke
Slide 12: OPEX % of Assets continued to decrease, primarily driven by Core G&A*
OPEX % of Assets continued to decrease, primarily driven by Core G&A* Total OPEX % of Assets(15) (bps) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) YOY SEQ Amortization of Intangible Assets Regulatory Change Change 18.8 18.6 1
Slide 13: Q4 Client Cash balances increased 5% sequentially
Q4 Client Cash balances increased 5% sequentially Client Cash balances ($ billions) Annual potential Gross Profit* benefit from rising interest rates ICA Balances (EOP) DCA Balances (EOP) Money Market Account Balances (EOP) Estimated Interest Rate Sensitivity with ICA Balances of ~$37B (with ~$1
Slide 14: In Q4, ICA balances remained well above 2019 levels
In Q4, ICA balances remained well above 2019 levels ICA balances remain elevated Overflow balances provide capacity when balances spike Overflow ICA Balances ($B) • When elevated market volatility leads ICA balances to temporarily exceed our Variable ICA Balances ($B) variable contract capacity,
Slide 15: We remain focused on investing to drive organic growth while delivering long-term operating leverage
We remain focused on investing to drive organic growth while delivering long-term operating leverage in our core business Long-term cost strategy 2021 Core G&A* context Our 2020 Core G&A* was $925M, translating to a 6.5% year-over-year growth rate, Deliver operating leverage in core business whi
Slide 16: Our balance sheet remained strong in Q4…
Our balance sheet remained strong in Q4… Cash Available for Corporate Use ($ millions) Credit Agreement Net Leverage Ratio Management Target Range (3.25x-3.5x) v Management Target Cash: $376 (~$200M) $339 Management Target Range v $296 (2x-2.75X) $282 $280 $236 $252 $227 2.15x 2.15x 2.16x $204 2.05x
Slide 17: …And we are currently prioritizing capital deployment to organic growth and M&A
…And we are currently prioritizing capital deployment to organic growth and M&A Shareholder Capital Returns ($ millions) Share Repurchases Dividends Total Payout Ratio as a % of EPS prior to Amortization of Intangible Assets* (As of 12/31/20) 107% 93% 105% 101% 101% 87% $170 18% 17% 16% $350M $1
Slide 18: Appendix
Appendix 18 LPL Financial Member FINRA/SIPC
Slide 19: Monthly metrics dashboard through December 2020
Monthly metrics dashboard through December 2020 Total Advisory and Brokerage Assets ($ billions) Total Net New Assets ($ billions) YOY SEQ Total Organic NNA Dividends plus interest minus Advisory Fees Acquired NNA Total Advisory and Brokerage Assets Advisory Assets % Total Change Change Annu
Slide 20: Q4 Gross Profit* increased 6% sequentially
Q4 Gross Profit* increased 6% sequentially Gross Profit* ($ millions) Net Advisory & Commission Fees Other Asset-Based(17) Interest Income and Other, net Transaction & Fee, Net of BC&E Client Cash $576 $556 $543 $536 $538 $534 $508 $506 $488 $151 $173 $105 $162 $163 $155 $109 $148 $8 $116
Slide 21: Q4 Total OPEX increased 5% sequentially, and increased 7% year-over-year
Q4 Total OPEX increased 5% sequentially, and increased 7% year-over-year Total OPEX(20) ($ millions) Core G&A* Promotional Employee Share-based Compensation D&A Expense (ex Amortization of Intangible Assets) Amortization of Intangible Assets Regulatory $363 $339 $339 $345 $17 $333 $325 $
Slide 22: Net Buy (Sell) Activity was $12.2 billion in Q4
Net Buy (Sell) Activity was $12.2 billion in Q4 Net Buy (Sell) Activity(21) Net Buy (Sell) Activity ($billions) Client Cash % of Total Advisory and Brokerage Assets 12.9 12.5 12.2 9.7 9.8 9.2 9.3 9.0 8.5 7.1% 5.6% 5.9% 5.7% 5.4% 4.3% 4.1% 4.5% 4.3% 4.3% 4.4% 2.3 0.2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 23: Calculation of Gross Profit
Calculation of Gross Profit Gross Profit is a non-GAAP financial measure. Please see a description of gross profit under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Set forth below is a calculation of Gross Profit for the periods presented on pages 5, 9,
Slide 24: Reconciliation of Net Income to EBITDA
Reconciliation of Net Income to EBITDA EBITDA is a non-GAAP financial measure. Please see a description of EBITDA under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below are reconciliations of the Company’s net income to EBITDA for the periods presented o
Slide 25: Reconciliation of GAAP EPS to EPS Prior to Amortization of Intangible Assets
Reconciliation of GAAP EPS to EPS Prior to Amortization of Intangible Assets EPS Prior to Amortization of Intangible Assets is a non-GAAP financial measure. Please see a description of EPS Prior to Amortization of Intangible Assets under “Non-GAAP Financial Measures” on page 3 of this presentation f
Slide 26: Reconciliation of Core G&A to Total Operating Expenses
Reconciliation of Core G&A to Total Operating Expenses Core G&A is a non-GAAP financial measure. Please see a description of Core G&A under “Non-GAAP Financial Measures” on page 3 of this presentation for additional information. Below are reconciliations of Core G&A to the Company’s total operating
Slide 27: Footnotes
Footnotes (1) In April 2020, the Company updated its definition of net new assets to include dividends plus interest, minus advisory fees (see FNs 4 and 5). Net new assets figures for periods prior to Q2 2020 appearing in this presentation have been recast using the updated definition. (2) Represent
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